Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:

2. The expected activity for the year was distributed among the company’s four products as follows:

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Assuming we have a case of influenza. Suppose the total cost of providing viraflu is $100 and the total cost of providing supportive care is $10. Suppose further that viraflu will result in a 0.5 QALY per person treated and providing supportive care alone results in 0.1 QALY.

1. What is the incremental cost-effectiveness of providing viraflu to persons with influenza relative to providing supportive care alone?

2. Suppose that the total cost of vaccinating an individual is $150 and that vaccination results in the gain of 0.75 QALY per person. Calculate the average cost-effectiveness of influenza vaccination and the incremental cost-effectiveness of influenza vaccination relative to treatment?

Use Lagrange multipliers to find the maximum production level when the total cost of labor (at $111 per unit) and capital (at $50 per unit) is limited to $250,000, where P is the production function, x is the number of units of labor, and y is the number of units of capital. (Round your answer to the nearest whole number.) (Please use the numbers given I've followed other 'solutions' and keep getting the wrong answer, I just want to see that the method used in response gets the correct answer and how.)

P(x, y) = 100x^0.25y^0.75

b. Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.2 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $1 million 10 years ago, and can be sold currently for $1.2 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.6 million higher than with the existing press, but product costs (excluding depreciation) will represent 50% of sales. The new press will not affect the firm’s net working capital requirements. The new press will be depreciated under MACRS, using a 5-year recovery period. The firm is subject to a 40% tax rate. Wells Printing’s cost of capital is 11%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.) [15 marks]

i. Determine the initial investment required by the new press. [2 marks]

ii) Determine the operating cash flows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.) [6 marks]

1. iii) Determine the payback period. [2 marks]
2. iv) Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed new press. [4 marks]
3. v) Make a recommendation to accept or reject the new press, and justify your answer. [1 marks]

1. Calculating Interest Rates. Assume the total cost of a college education will be $345,000 when your child enters college in 18 years. You presently have $73,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?
2. Calculating the Number of Periods. At 6.1 percent interest, how long does it take to double your money? To quadruple it?
3. Calculating Interest Rates. According to the Census Bureau, in October 2016, the average house price in the United States was $354,900. In October 2000, the average price was $215,100. What was the annual increase in the price of the average house sold?

The total weekly cost (in dollars) incurred by Lincoln Records in pressing x compact discs is given by the following function.

C(x) = 2000 + 2x − 0.0001x²    (0 ≤ x ≤ 6000)

a. What is the actual cost incurred in producing the 991st and the 1971st disc?

b. What is the marginal cost when x = 990 and 1970?

Williams Commuter Air Service realizes a monthly revenue represented by the following function, where R(x) is measured in dollars and the price charged per passenger is x dollars.

R(x) = 9,600x − 120x²

a. Find the marginal revenue R'(x).

b. Compute the following values.

-R'(39)

-R'(40)

-R'(41)

c. Based on the results of part (b), what price (in dollars) should the airline charge in order to maximize their revenue?

Regression Project: Data

The table below contains the price, demand, and total cost data for the production of x widgets. Here p is the price (in dollars) of a widget for an annual demand of x widgets, and C is the annual total cost (in dollars) of producing x widgets per year.

Regression Project: Cost

1. Use the given data to find a regression line C = m x + b that best fits the total cost data for total annual cost C as a function of the annual number of widgets produced x. Here, total cost is the dependent variable, and number of widgets is the independent variable. Find the regression function for cost, and write it as C ( x ) = m x + b.

2. Use the data to make a scatter plot. Include your regression line on the same plot. Adjust the max/min to display the data in a reasonable way. On the plot, be sure to

   • Make a title for the plot "Annual Total Cost of Producing Widgets".

   • Label your axes. Label the horizontal axis "Annual widget production", and label the vertical axis "Annual total cost ($)".

3. Does it look like the regression line models the data well? Why or why not?

4. Use the regression function you found to estimate C ( 0 ), C ( 35 ), and C ( 105 ). Give the real-world interpretation of the result of each computation in complete sentences. Be sure to include units.

5. Using your regression function for cost, what is the fixed cost? What is the variable cost? Give the real-world interpretation of the result of each computation in complete sentences. Be sure to include units.

Let the total cost function be C (q) = 50 + 2q + 0:5q2. For what values of q we have economies of scale?

1. Suppose that a firm’s short-run total cost function is STC= 0.1q² + 4q +100. Will the producer surplus at P=$15 be $302.5?
2. Suppose that a firm is price taker. If the price is equal to marginal cost, then the profit is being maximized.
3. If a firm wished to maximize profit, it will always reduce output if wage rates rise.
4. If a competitive firm's price is below its marginal cost, an increase in production will usually decrease profits.
5. A profit‑maximizing firm will never hire that quantity of a factor of production for which that factor has an increasing marginal productivity because it would not be maximizing profits.

A manufacturer of tennis rackets finds that the total cost C(x) (in dollars) of manufacturing x rackets/day is given by

C(x) = 900 + 3x + 0.0003x².

Each racket can be sold at a price of p dollars, where p is related to x by the demand equation

p = 5 − 0.0002x.

If all rackets that are manufactured can be sold, find the daily level of production that will yield a maximum profit for the manufacturer. Hint: The revenue is

R(x) = px,

and the profit is

P(x) = R(x) − C(x).

How Many Rackets?

[Hint:10,000 rackets is incorrect]